GLOBAL - The global cross-border pension scheme will begin operating from September 1 this year, to give employees of a US multi-national access to pension benefits through a single plan arrangement.

Although officials say they cannot disclose the firm behind the scheme and its subsequent domicile, it is understood the cross-border plan will initially be divided into three Institutions for Occupational Retirement Provision (IORP) - two in EU countries while a third will be created for non-EU employees operating in local markets outside the European Union and with mobile positions.

Paul Kelly, principal at consulting firm Towers Perrin, has been involved in the project and with coordinating activity between all of the outsourced services employed in different countries to support the multi-national's defined contribution scheme.

The task has not been a rapid one, noted Kelly, as it has taken over a year to define what the employer wanted to offer, where it should initially be located and domiciled, and what the business case would be.

As a result, the scheme is expected to first establish three base arrangements and extend the plan into other jurisdictions, said Kelly.

"It is a defined contribution arrangement so there are no liability issues to speak of, making the investment side of the plan relatively easy. Choice of custodian and investment managers are therefore relatively simple. But the tricky element is the benefits administration each ‘section' has to have a social and labour law. We are starting with three sections because some countries are more complicated. Belgium, for example, works in four languages. And we need to be clear the scheme is fully compliant with social and labour law," said Kelly.

All of the support services to the - as yet undisclosed - pension scheme are outsourced to a series of third-parties in custody, investment,  consultancy and law, although Towers Perrin is at the centre coordinating the process and ensuring the relevant regulatory regimes will be adhered to.

While setting the scheme up to cope with local requirements has been a lengthy process, Kelly noted authorities in the Netherlands, Belgium, Ireland and Luxembourg have put in a great deal of work to make it possible for multi-national companies to make such a move.

"We expect funds to use countries which make this possible as having the regulator engaged is very helpful. Which country you end up in is then a business choice. But we are very comfortable the September 1 date will be achieved," added Kelly.

"Finally, Towers Perrin is pleased to say that we have worked closely to help one of our US multinational clients to build the first true cross-border plan which will be introduced with effect from 1 September 2008. This will be an IORP with three sections - two EU countries and a further section for non-EU employees, designed to deal with both internationally mobile and local employees".

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